Derek Burnett
Derek Burnett is a Contributing Writer at Bottom Line Personal, where he writes frequently on health and wellness. He is also a contributing editor with Reader’s Digest magazine.
Managing your personal finances can feel like a full-time job. There’s so much to think about, from how much to spend on groceries, to how much to save, how much to invest, when to retire, how to conduct estate planning, and much more. Somehow, we’re all expected to find our way through, most of us without any specialized training.
Fortunately, there are plenty of professionals willing to lend their expertise to the personal financial challenges we face. But many of us, despite feeling a strong urge to turn to someone for help, immediately dismiss the idea, assuming only rich people can afford to hire financial advisors, or that our own circumstances are so unusual or dire or mundane as to be beyond help or not worth bothering with. The truth is, financial advisors come in all shapes and sizes. Chances are, one or more would be a good fit for you, helping you keep your financial life on the right track.
If you’ve ever given thought to hiring a money expert, you may have noticed that the term “financial advisor” is frustratingly broad. After all, by definition, a financial advisor is simply someone who counsels others on financial matters—but which financial matters? Picking stocks? Retirement planning? Saving for college? Budgeting? Tax issues? The reality is that people specializing in any of these areas might refer to themselves as financial advisors. In other words, the title “financial advisor” is not tied to any specific credential or designation, so you’ll have to do some careful research to make sure you’re finding someone who can serve your specific needs.
Because “financial advisor” is a catch-all term, there’s no single certification or designation that qualifies someone to hold that title. Instead, you’ll probably want to find somebody with one or more recognized credentials that pertain to specialties (While it’s conceivable that someone could give you perfectly good financial advice without ever having earned a certificate, hiring someone with an industry designation is the best way to make sure of their expertise).
New designations, credentials and certifications are created all the time, but a few industry standards are universally recognized as quality indicators. These include Certified Financial Planner (CFP), Registered Investment Advisor (RIA), Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), Certified Fund Specialist (CFS), and Personal Finance Specialist (PFS). For newer, niche subspecialties, no single certification may yet predominate. Before hiring an advisor, look closely at what earning their designation entailed to ensure they have the proper expertise to serve your needs.
Unlike “financial advisor,” the designation “Certified Financial Planner” is indeed reserved for holders of a specific certificate, offered by the Certified Financial Planner Board of Standards. Instead of focusing narrowly on, say, stocks or taxes, CFPs take a broad approach to helping you with your finances. The CFP designation requires extensive training and an ethical pledge which includes fiduciary status. A fiduciary is an advisor who is ethically and legally bound to help manage your money and investments in a way that prioritizes your interests above all else. In other words, you should be able to count on a fiduciary not to push products that will earn them a commission while compromising your best interests.
A CFP will talk with you at length about a broad range of financial topics, including your income, your assets, your career goals, your family size, your savings targets, your risk appetite, your retirement plans, your charitable giving, your tax concerns, and more. From this discussion, the CFP will help you design an overarching plan to help you meet your goals, which you’ll periodically revisit as circumstances change.
To find a CFP, visit FPA PlannerSearch.
Holders of this designation fill a role quite similar to that of Certified Financial Planners. Their certificate is awarded by the American College of Financial Services, and it requires significant industry experience along with extensive college-level coursework in such topics as asset protection, retirement planning, and estate planning. Like CFPs, ChFC holders have a fiduciary duty to act in the best interest of their clients.
To search for ChFCs, go to Your Advisor Guide.
Just as the name suggests, wealth advisors work with high-net-worth clients, guiding them on an array of financial matters. Because they focus on the higher end of the market, they take a specialized approach to such areas as estate planning, asset protection, and taxes, focusing on the considerations of people with incomes or assets well above the norm.
“Wealth advisor,” however, is not an industry designation. People who put it on their business cards may be CFPs, Certified Public Accountants (CPAs), or holders of FINRA Series 7, 65, or 66 licenses.
Despite our best intentions, the cold truth is that most of us make the bulk of our financial decisions based on emotion, not logic. And whether we’re aware of it or not, each of us has a relationship with money that emerges from our formative experiences, our family lives and our personalities. A good financial therapist is equipped with training both in mental health and finance, and so can help you confront your unhealthy attitudes and unproductive thoughts and behaviors around money, while also helping you right your financial ship.
The Financial Therapy Association offers a Certified Financial Therapist (CFT-1) designation. You can search for members of the association at their website.
A finance coach takes an intimate, hands-on, behavioralist approach to helping you with your money. They meet with you once a month or more frequently to help you track your money habits, identify problem areas, set and meet goals, and develop the knowledge and wisdom you need to thrive. Like financial therapists, coaches emphasize the role of emotion, habits and psychology in our financial lives. They tend to be less laser-focused on, for example, identifying specific investment opportunities, than other types of financial advisors may be.
Unfortunately, anyone can create a website and start calling themselves a finance coach. You’d do best to ensure than anyone you hire has one or more recognized finance credentials, not only to make sure they know what they’re talking about when it comes to money, but also because licenses are required for certain types of advisory activities.
Sometimes referred to as a “registered financial professional,” a broker is an agent licensed to buy or sell securities on your behalf. There are two main types of brokers. Discount brokers do nothing besides execute trades. Full-service brokers make recommendations, help with financial planning, and generally act as broad financial advisors. If you’re looking for guidance and not just execution, you’ll want a full-service broker.
A full-service broker will likely have a series 63 license to buy and sell securities, as well as a series 6 license for mutual funds and other products. Many will have several other licenses and designations.
According to federal law, investment advisers (spelled with an E by the Securities and Exchange Commission, which regulates them along with the states) are licensed to sell advice regarding securities. Note that a broker may buy and sell securities on your behalf but may not advise you as to which securities to invest in or sell without being registered with the SEC as an investment adviser.
To many experts, “Registered Investment Advisor” (RIA) is the most desirable title for a financial planner to hold. RIAs are fiduciaries regulated by the Securities and Exchange Commission (SEC) or by their states. When you’re considering hiring one, ask to see their Form ADV Part II and search for any disciplinary actions with the SEC.
Credit counselors typically work for non-profit credit counseling organizations. Their job is to help you rehabilitate your finances, especially in matters of debt and budgeting. They can help you strategize for paying down your debt, help you avoid taking on new bad debt, help you negotiate for lower monthly payments, guide you in establishing a sustainable household budget, and lead you through the steps necessary for improving your credit. While they will likely ask you about your long-term financial goals, most cannot provide the kind of detailed planning that some other types of advisors offer.
Note that credit counselors and debt settlement companies are not the same thing. If you find yourself overwhelmed by debt, always go first to a credit counselor before turning to a debt settlement company, which may charge you fees without providing effective service.
You can find a counselor through the Financial Counseling Association of America or the National Foundation for Credit Counseling.
